Health-Benefit Costs Rise Most Since 2005, Surpass $15,000

“Rising health-care costs have crowded out other elements of the compensation package,” said Randall Abbott, a senior health-care consultant at Towers Watson & Co. Photographer: George Frey/Bloomberg

Sept. 27 (Bloomberg) -- The cost for businesses to buy
health coverage for workers rose the most this year since 2005
and may reach $32,175 for a family in 2021, according to a
survey of private and public employers.

The average cost of a family policy climbed 9 percent in
2011 to $15,073, according to a poll of 2,088 private companies
and state and local government agencies by the Henry J. Kaiser
Family Foundation in Menlo Park, California, and the Chicago-based American Hospital Association’s Health Research and
Educational Trust.

The groups’ findings, based on data collected through May,
show that health insurance is consuming a bigger share of
employer costs, preempting pay raises and making companies pass
on more medical costs to their workers, benefit consultants
said. The premiums reported are in effect for the full year.

“Rising health-care costs have crowded out other elements
of the compensation package,” said Randall Abbott, a senior
health-care consultant at Towers Watson & Co. “That’s the
price we are paying, beyond the fact that health-care cost in
and of itself continues to be more expensive.”

The average price of a family plan has risen 113 percent
since 2001, the organizations reported.

Health Overhaul Effect

The health law enacted last year accounts for 1 to 2
percentage points of the premium increases in 2011, said Drew
Altman, chief executive officer of the Kaiser Family Foundation.
Other contributors include higher medical prices and insurers
raising premiums in anticipation of an economic recovery that
would spur greater use of health-care services, he said during a
conference call with reporters today.

Premium increases aren’t the result of the health overhaul,
White House Deputy Chief of Staff Nancy-Ann DeParle wrote in a
blog post. Premiums rose partly because insurers overestimated
the new law’s effect and the gain in health-care spending this
year, she wrote. Thirteen of the 14 largest insurers exceeded
profit in the first quarter, she wrote.

Contributing to the rise in premiums are escalating prices
for medical products and services, fewer young and healthy
people in the insurance pool and new preventive benefits under
the health overhaul, said Karen Ignagni, the chief executive
officer of the Washington-based America’s Health Insurance
Plans, said in a statement.

Premium Increases

The survey findings are at odds with other studies and with
companies’ financial statements, suggesting this year’s premium
increases may be smaller, New York-based Goldman Sachs Group
Inc. analyst Matthew Borsch wrote in a research note today.

As premiums rise, wages are projected to increase 2.1
percent on average this year, according to the survey issued
today. Two-thirds of companies plan to ask workers to pay a
bigger portion of premiums next year, New York-based Towers
Watson reported this month.

Employees are paying 28 percent of premiums on average for
family plans this year, similar to 2010. The proportion of
health insurance premiums paid by workers has risen 131 percent
since 2001, according to the report. Sixty percent of employers
said they offered medical benefits this year, a decrease from 69
percent in 2010.

To defray the cost, companies are offering health benefits
with deductibles of at least $2,400 for a family plan paired
with a tax-free medical expense account, the survey shows. High-deductible plans carry lower premiums and shift more medical
costs to workers, according to the report.

The average premium for a high-deductible plan this year is
$13,704 for a family. Among workers offered health benefits, 17
percent are enrolled in a high-deductible health plan with a
savings option, an increase from 13 percent in 2010 and 8
percent in 2009, researchers found.

The 2010 health-care law had a limited effect on employer-sponsored health benefits because few provisions have taken
effect, according to the study.